The signaling effect of foreign exchange intervention
A) never has any effect on exchange rates.
B) can alter the market's view of exchange rates independent from the stance of monetary and fiscal policies.
C) cannot cause an immediate exchange rate change when bonds denominated in different currencies are perfect substitutes.
D) never leads to actual changes in monetary or fiscal policy.
E) can alter the market's view of future monetary policies and cause an immediate exchange rate change.

Question

Quizplus · Accepted Answer

The Answer of The signaling effect of foreign exchange intervention
A) never has any effect on exchange rates.
B) can alter the market's view of exchange rates independent from the stance of monetary and fiscal policies.
C) cannot cause an immediate exchange rate change when bonds denominated in different currencies are perfect substitutes.
D) never leads to actual changes in monetary or fiscal policy.
E) can alter the market's view of future monetary policies and cause an immediate exchange rate change.

The Signaling Effect of Foreign Exchange Intervention